A month after President Obama introduced his ill-fated proposal to tax popular 529 college savings plans, the GOP-led House will vote on a bipartisan measure to expand the program.
Lawmakers have proposed legislation to expand the plans in various forms in recent years but the effort to strengthen the program took on new urgency in recent weeks after President Obama called for eliminating tax-free withdrawals of 529 savings in his 2016 budget proposal.
Obama’s plan to tax 529 accounts was widely criticized by both Republicans and Democrats, and the president eventually dropped the idea at the urging of House Minority Leader Nancy Pelosi and other Democrats.
Republican leaders are moving their 529 plan to the House floor for a vote on Wednesday, part of a trio of bills the House will debate this week that are aimed at reducing taxes.
The proposal expands the 529 savings program by adding computers and Internet service costs to the approved spending, which now includes tuition, books and some other college expenses. The legislation will also allow those who use the program to return funds to their 529 accounts if they withdraw from school or otherwise receive a tuition refund.
The legislation would eliminate tax accounting requirements that date back to 2001, when 529 savings withdrawals were not tax free.
The legislation is sponsored by Reps. Lynn Jenkins, R-Kansas, and Ron Kind, D-Wis., who said the measure “promotes college access and proactively encourages families and students to save in advance, while eliminating perceived barriers to savings.”
The House Ways and Means Committee approved the legislation by voice vote earlier this month after rejected a proposed Democratic amendment to limit the program to those with annual incomes below $3 million.
